Profit-sharing plan solutions
Age-weighted, new comparability, and Social Security integrated
Vanguard Retirement Plan Access™ offers age-weighted, new comparability, and Social Security integrated allocation methods
to provide a streamlined, cost-effective way to increase savings without inflating overhead. Consider the important advantages
of these retirement plan options.
Who might benefit?
• All types of businesses, including corporations, partnerships, and sole proprietorships.
• Businesses with fewer than 50 employees.
• Businesses in which the owner is older than the majority of the employees.
• Instances in which owners seek to maximize their contributions.
What are the benefits?
Maximize savings
Flexibility
•Plan sponsors can achieve savings of up to 25%
•Plan sponsors have flexibility to allocate discretionary
of eligible payroll.
contributions in their favor and in favor of key personnel.
•Plan sponsors maximize tax savings because
•We offer a comprehensive package that is priced to grow
all contribution and plan-operating costs are
tax deductible.
in step with a small business.
How do these plans work?
Age-weighted
Simply put, an age-weighted profit-sharing plan allows employers to allocate a greater percentage of profit-sharing
contributions to older employees, under the logic that they have less time to save.
Pro rata
Compensation
Contribution
Age-weighted
Percent of
contribution
Contribution
Percent of
contribution
$45,000
20.0%
Participant
Age
Owner
49
$225,000
$45,000
Employee 1
35
80,000
16,000
20.0
5,120
6.4
Employee 2
32
40,000
8,000
20.0
2,000
5.0
Employee 3
28
35,000
7,000
20.0
1,260
3.6
Employee 4
29
30,000
6,000
20.0
1,170
3.9
These numbers are for illustrative purposes only. Actual results may vary.
20.0%
New comparability
A new comparability profit-sharing plan divides employees into two or more groups on the basis of objective standards. An IRSapproved formula allows a greater percentage of profit-sharing contributions to be allocated to one group (e.g., “the owner”)
versus the other group(s). Because of the allocation flexibility of this type of plan, it is subject to stringent discrimination tests.
Additionally, changing employee demographics throughout the year may impact the groups and their contribution rates.
Pro rata
Compensation
Contribution
New comparability
Percent of
contribution
Contribution
Percent of
contribution
$45,000
20.0%
Participant
Age
Owner
49
$225,000
$45,000
Employee 1
35
80,000
16,000
20.0
4,000
5.0
Employee 2
32
40,000
8,000
20.0
2,000
5.0
Employee 3
28
35,000
7,000
20.0
1,750
5.0
Employee 4
29
30,000
6,000
20.0
1,500
5.0
20.0%
These numbers are for illustrative purposes only. Actual results may vary.
Social Security integrated
The Social Security taxable wage can be integrated into a plan’s allocation formula as a feature of a 401(k) plan. With this
feature, employees earning more than the taxable wage base are eligible to receive an additional allocation and employees
earning less than this integration receive a base pro rata allocation. The additional contribution is allowed for those employees
who do not have the benefit of the employer’s Social Security contribution on their excess compensation.
Pro rata
Social Security integrated
Contribution
Percent of
contribution
Contribution
Percent of
contribution
$225,000
$45,000
20.00%
$35,010
15.56%
35
80,000
16,000
20.00
Employee 2
32
40,000
8,000
20.00
4,972
12.43
Employee 3
28
35,000
7,000
20.00
4,351
12.43
Employee 4
29
30,000
6,000
20.00
3,729
12.43
Participant
Age
Owner
49
Employee 1
Compensation
9,944
12.43
These numbers are for illustrative purposes only. Actual results may vary.
To learn more about these plan design features, contact Vanguard at 888-684-401K.
Retirement plan recordkeeping and administrative services are provided by The Vanguard Group, Inc. (VGI). VGI has entered into an agreement with Ascensus,
Inc., to provide certain plan recordkeeping and administrative services on its behalf. Ascensus is not affiliated with The Vanguard Group, Inc., or any of its
affiliates. Ascensus® is a registered trademark of Ascensus, Inc.
© 2015 The Vanguard Group, Inc. All rights reserved. VRPAAWNC 112015